SWOT Analysis / TOWS Matrix for Itochu Corp. (Japan)
Based on various researches at Oak Spring University , Itochu Corp. is operating in a macro-environment that has been destablized by – banking and financial system is disrupted by Bitcoin and other crypto currencies, wage bills are increasing, increasing commodity prices, central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy, supply chains are disrupted by pandemic , geopolitical disruptions,
there is increasing trade war between United States & China, challanges to central banks by blockchain based private currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Itochu Corp. can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Itochu Corp., and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Itochu Corp. operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Itochu Corp. can be done for the following purposes –
1. Strategic planning of Itochu Corp.
2. Improving business portfolio management of Itochu Corp.
3. Assessing feasibility of the new initiative in Japan
4. Making a Chemical Manufacturing sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Itochu Corp.
Strengths of Itochu Corp. | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Itochu Corp. are -
Learning organization
- Itochu Corp. is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Itochu Corp. is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Itochu Corp. emphasize – knowledge, initiative, and innovation.
High brand equity
– Itochu Corp. has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Itochu Corp. to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Analytics focus
– Itochu Corp. is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Chemical Manufacturing industry. The technology infrastructure of Japan is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Innovation driven organization
– Itochu Corp. is one of the most innovative firm in Chemical Manufacturing sector.
Digital Transformation in Chemical Manufacturing industry
- digital transformation varies from industry to industry. For Itochu Corp. digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Itochu Corp. has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Successful track record of launching new products
– Itochu Corp. has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Itochu Corp. has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Diverse revenue streams
– Itochu Corp. is present in almost all the verticals within the Chemical Manufacturing industry. This has provided Itochu Corp. a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Sustainable margins compare to other players in Chemical Manufacturing industry
– Itochu Corp. has clearly differentiated products in the market place. This has enabled Itochu Corp. to fetch slight price premium compare to the competitors in the Chemical Manufacturing industry. The sustainable margins have also helped Itochu Corp. to invest into research and development (R&D) and innovation.
Highly skilled collaborators
– Itochu Corp. has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Chemical Manufacturing industry. Secondly the value chain collaborators of Itochu Corp. have helped the firm to develop new products and bring them quickly to the marketplace.
Cross disciplinary teams
– Horizontal connected teams at the Itochu Corp. are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Strong track record of project management in the Chemical Manufacturing industry
– Itochu Corp. is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Operational resilience
– The operational resilience strategy of Itochu Corp. comprises – understanding the underlying the factors in the Chemical Manufacturing industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Weaknesses of Itochu Corp. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Itochu Corp. are -
Skills based hiring in Chemical Manufacturing industry
– The stress on hiring functional specialists at Itochu Corp. has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Compensation and incentives
– The revenue per employee of Itochu Corp. is just above the Chemical Manufacturing industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
No frontier risks strategy
– From the 10K / annual statement of Itochu Corp., it seems that company is thinking out the frontier risks that can impact Chemical Manufacturing industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Capital Spending Reduction
– Even during the low interest decade, Itochu Corp. has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Chemical Manufacturing industry using digital technology.
Slow to strategic competitive environment developments
– As Itochu Corp. is one of the leading players in the Chemical Manufacturing industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Chemical Manufacturing industry in last five years.
Low market penetration in new markets
– Outside its home market of Japan, Itochu Corp. needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High cash cycle compare to competitors
Itochu Corp. has a high cash cycle compare to other players in the Chemical Manufacturing industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
High dependence on Itochu Corp. ‘s star products
– The top 2 products and services of Itochu Corp. still accounts for major business revenue. This dependence on star products in Chemical Manufacturing industry has resulted into insufficient focus on developing new products, even though Itochu Corp. has relatively successful track record of launching new products.
Employees’ less understanding of Itochu Corp. strategy
– From the outside it seems that the employees of Itochu Corp. don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Need for greater diversity
– Itochu Corp. has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Itochu Corp. supply chain. Even after few cautionary changes, Itochu Corp. is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Itochu Corp. vulnerable to further global disruptions in South East Asia.
Itochu Corp. Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Itochu Corp. are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Itochu Corp. can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help Itochu Corp. to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Creating value in data economy
– The success of analytics program of Itochu Corp. has opened avenues for new revenue streams for the organization in Chemical Manufacturing industry. This can help Itochu Corp. to build a more holistic ecosystem for Itochu Corp. products in the Chemical Manufacturing industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Loyalty marketing
– Itochu Corp. has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Itochu Corp. is facing challenges because of the dominance of functional experts in the organization. Itochu Corp. can utilize new technology in the field of Chemical Manufacturing industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Itochu Corp. to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Chemical Manufacturing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Itochu Corp. can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Itochu Corp. can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Better consumer reach
– The expansion of the 5G network will help Itochu Corp. to increase its market reach. Itochu Corp. will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Low interest rates
– Even though inflation is raising its head in most developed economies, Itochu Corp. can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Building a culture of innovation
– managers at Itochu Corp. can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Chemical Manufacturing industry.
Leveraging digital technologies
– Itochu Corp. can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Itochu Corp. can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Itochu Corp. can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Buying journey improvements
– Itochu Corp. can improve the customer journey of consumers in the Chemical Manufacturing industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Threats Itochu Corp. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Itochu Corp. are -
Easy access to finance
– Easy access to finance in Chemical Manufacturing industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Itochu Corp. can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Itochu Corp. business can come under increasing regulations regarding data privacy, data security, etc.
Consumer confidence and its impact on Itochu Corp. demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Chemical Manufacturing industry and other sectors.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Itochu Corp..
Regulatory challenges
– Itochu Corp. needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Chemical Manufacturing industry regulations.
High dependence on third party suppliers
– Itochu Corp. high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Itochu Corp. needs to understand the core reasons impacting the Chemical Manufacturing industry. This will help it in building a better workplace.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Itochu Corp. can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate Itochu Corp. prominent markets.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Itochu Corp. will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Shortening product life cycle
– it is one of the major threat that Itochu Corp. is facing in Chemical Manufacturing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Environmental challenges
– Itochu Corp. needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Itochu Corp. can take advantage of this fund but it will also bring new competitors in the Chemical Manufacturing industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Chemical Manufacturing industry are lowering. It can presents Itochu Corp. with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Chemical Manufacturing sector.
Weighted SWOT Analysis of Itochu Corp. Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Itochu Corp. needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of Itochu Corp. is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of Itochu Corp. is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Itochu Corp. to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Itochu Corp. needs to make to build a sustainable competitive advantage.